1 / 21

External costs from major accidents in non-nuclear fuel chains

External costs from major accidents in non-nuclear fuel chains. Input to D5.2 Methodology and Evaluation of external costs… U. of Bath, May 2003, PSI. Monetary valuation of accident impacts. Impacts: Energy chain-specific; small or large accidents Acute Mortality Energy chain specific;

tien
Download Presentation

External costs from major accidents in non-nuclear fuel chains

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. External costs from major accidents in non-nuclear fuel chains Input to D5.2 Methodology and Evaluation of external costs… U. of Bath, May 2003, PSI

  2. Monetary valuation of accident impacts • Impacts: Energy chain-specific; small or large accidents • Acute Mortality Energy chain specific; • Morbidity • Physical injury in accident • Mental trauma - from physical injury, evacuation • Evacuation (costs of resettlement/accommodation) • Clean-up/repair costs and WTP for recreational/ecosystem losses - oil spills • Ban on consumption of food • Land contamination • Economic losses

  3. Welfare components of impacts • Of health (and some other) impacts • Resource costs e.g. medical costs (1) • Opportunity costs e.g. lost productivity (2) • Dis-utility e.g. pain/suffering, inconvenience (3) • Nb. WTP Measures are (3) + (2) and some of (1), depending on how much the individual pays

  4. Mortality/Morbidity • Mortality: based on road accident valuation • ExternE: 3.14M Euro/VPF • Carthy: 1M Euro/VPF • Morbidity: literature differentiates between severe and minor injuries; we require single value since cannot categorise type of injury. • recommend to use values as extremes of range and take mid-point: Euro 207,106 (2000 prices) • Should we adjust these values?

  5. Mortality/Morbidity • What degree of internalisation can we assume in the treatment of health effects? • Method: • literature review of wage-risk valuation studies (ex ante) • evidence from compensation practice

  6. Mortality/Morbidity - occupational • Mortality risks to employees - are they internalised? • Ideally, would need to know: • VSL if fully internalised • actual VSL, derived from wage-risk studies • Practically, can examine: • wage risk studies to see if there are proxies that can be used • e.g. compare VSLs from unionised and non-unionised employees

  7. Mortality/Morbidity - occupational • But, wage risk studies hard to interpret in this way • Role of unions: UK - some studies found union affiliation had an insignificant impact on risk premium, others found higher union risk premiums: Mean difference approx 20% • internalisation increases with education level of labour force (Dorman, 1998) but difficult to use as robust proxy • Other factors also increase uncertainty of estimates • Omitted variables bias • Endogeneity: the level of risk that workers will be willing to undertake is negatively related to their wealth, assuming that safety is a normal good

  8. Mortality/Morbidity - occupational • On average we conclude that • In industrialized economies of the EU occupational risk really is substantially internalised. • In the less effective economies of Eastern Europe there is still some internalisation but this is less.

  9. Summary of European Labour Market Studies of VSL

  10. Mortality/Morbidity - public • Standard choice models suggests individuals, depending on aversion to risk, maximise utility by choosing between two alternatives:buying insurance or mitigation measures • But, empirical literature does not support this model. Why? • Misperception of risks • Low probability events perceived as impossible events • Role of emotions e.g. fear & dread • Lack of clarity on probabilities of losses related to given risks • additionally, pain/suffering likely to be significant

  11. Mortality/Morbidity • Ex post evidence • Liability insurers pay: • mixture of lump sum and annuities related to wage losses and medical costs for injuries (though in France: indexation borne by state) • mixture of lump sum and annuities related to wage losses to family for fatalities • Coverage for accidents varies over countries & industries: 70-80% average of material losses are paid. Adjustment: insurance premium + 30-40% • if take conservative estimate of pain/suffering to be considered. Adjustment: material cost + 50% •  insurance premium is 50% of full internalisation

  12. Mortality/Morbidity - adjustments • Scale of accident • hypothesis that risk of large scale accidents valued more highly • evidence (J-L & Loomes) comparing road accidents with large-scale accidents from proximity to airport does not support hypothesis • (But spending on e.g. nuclear protection does support it). • Size of risk • hypothesis - probability range smaller than in road transport context so if non-linearity in risk values, different VPF • no evidence to support this

  13. Mortality/Morbidity - adjustments • Age of victim • Accident-derived VSL appropriate - assume average life expectancy • Weighting for Extra-EU impacts (ExternE consensus) • EU impacts plus impacts in other regions with globally averaged values (‘world average’); • EU impacts plus impacts in other regions with EU values (‘EU values’).

  14. Recommendations • Estimates for degree of internalisation (generic) • Occupational: 80% (70% - 100%) • Public: 50% (30% - 70%) • No adjustments for scale & size of risk

  15. Evacuation/resettlement • Internalised to some degree through insurance • Evidence on resource costs - 2 US Studies • Euro 108 - 180/day/household • Evidence on opportunity costs UK CBI • direct costs of absenteeism: Euro 88 – 230per person day • Dis-utility?

  16. Oil Spills • Some attention has been given to the different welfare components following high profile spills

  17. Sea Empress - Atlantic,off S.Wales, 1996

  18. Oil Spills in Caspian Sea • Estimates of damage costs average at Euro 2600 per ton. • Typical spills around 10 - 30,000 tons

  19. Exxon Valdes, Gulf of Alaska, 1989

  20. Oil Spills - conclusions • Unit values? • Exxon Valdes: Euro 26,333/tonne crude oil • CV study post accident: WTP Euro 31/household • Sea Empress: Euro 2368/tonne crude oil • Transfer of unit values for different welfare components possible though constrained by context-specific factors

  21. Other impacts • Ban on consumption of food • Theory - trace through market impacts • No evidence from fuel chain though in future could use simulations • Indicative evidence: Euro 250m to UK Beef producers for BSE-related losses • Land Contamination • Theory - can be estimated by using differences in land values • Evidence may exist from historical clean-ups but site-specific • Economic losses • Theory - change in stock market value of businesses • Historical evidence exists e.g. for oil spills but site-specific

More Related